The S&P 500’s modest turn lower in the past several days has coincided with a meaningful downturn in investor sentiment. According to the weekly sentiment survey run by the American Association of Individual Investors (AAII), only 37.7% of respondents reported as bullish this week compared to 45.5% last week and over 50% one month ago. At current levels, bullish sentiment is now at the lowest level in six months.
As could be expected, the drop in bullish sentiment has resulted in an uptick in bearish sentiment. Bears accounted for 29.9% of responses this week. That is up 9.3 percentage points in the past two weeks off of the recent low of 20.6%.While that is a decent sized increase, it only leaves the reading at the highest level in a little over a month.
Put together, there are still more investors reporting as bullish than bearish with the former outnumbering the latter by 7.8 percentage points.
As shown below, it has now been 26 consecutive weeks in which bulls have outnumbered bears.That is a historically long stretch of bullish sentiment.This current streak has now surpassed two 24-week long runs ending in July 2021 and April 2024 for the longest streak since 2015.Prior to that, there have only been seven other times in which sentiment has been net bullish for more than half a year.
The AAII survey is not the only gauge that continues to show bullish sentiment. When combined with the Investors Intelligence survey and NAAIM Exposure index into our Sentiment Composite, these three surveys all indicate investors remain firmly bullish with levels around 0.54 standard deviations above the historical average.
Not only has the AAII bull-bear spread been positive for half a year, but so too has our Sentiment Composite.For this index, there have only been three other streaks in which it has been positive for as long as the present. The first of these was a 33 week long run ending in mid-2015.The next longest and most recent prior streak lasted just under a year (50 weeks) coming to a close in September 2021. Then there was the record streak of 72 weeks in a row ending in March of 2018.More By This Author:Looking For A Rebound S&P Equal Weight Vs. Cap WeightPhilip Morris International Pops; Yield Drops